Cypress to withdraw from PLD business

SAN JOSE, Calif. -- Cypress Semiconductor Wednesday (July 30)confirmed that it is phasing out its programmable logic business, saying that it makes little sense to fight with a handful of chip companies that focus exclusively on programmable logic devices (PLDs).

The company started informing customers and distributors earlier this year that it will stop manufacturing its older simple PLD and complex PLD products by 2005. The company's two high-density CPLD lines are still years away from end-of-life notification, but Cypress officials said the company will not develop any new architectures to succeed those it offers today.

Cypress, which has been making PLDs since 1986, has managed to maintain a four to five percent marketshare of the overall PLD business, mostly through sales of CPLDs, said Gahan Richardson, senior product marketing manager for the datacomm division at Cypress.

But the company doesn't want to compete in the market over the long term unless it can be leader. Cypress and Atmel are the two remaining broad-line semiconductor suppliers that provide PLDs, while Xilinx, Altera and Lattice Semiconductor are focused solely on PLDs.

"Cypress strives to be number one or number two in every market, and for us to be number one or two in the PLD business means we would have to displace Xilinx or Altera, and I don't think we have a path to do that," Richardson said.

Cypress offers CPLDs with up to 3,000 macrocells, or about 200,000 gates. Had the company decided to develop a next-generation architecture with 1 million gates or more, it would have entered the domain of FPGAs, a market dominated by Xilinx and Altera.

For its part, Cypress said it will continue to develop intellectual property cores aimed at FPGAs from Xilinx and Altera as well as its own CPLDs. Earlier this week, for example, Xilinx and Cypress announced a reference design for Xilinx's Virtex-2 FPGA that includes a Cypress-made core to handle data encapsulation.

Cypress said it has informed customers and distributors about PLD products that will phased out in 2005 " the Flash370i and Max340 CPLDs and all simple PLD products. For the flash-based products, the company is providing a migration path to its Ultra37000 series of CPLDs.

The company stressed that it has no plans to stop producing its Ultra37000 products, the Delta39Kor a lower-density derivative of the Ultra product called the Quantum38K, all of which were introduced within the last five years. Richardson said PLDs have a typical design-in period that lasts from three to six years, and that it takes even longer for sales to peak.

"The Ultra37000 still hasn't hit its peak revenue yet, and we've had that product in the market for five years," Richardson said.

The decision to gradually phase out its PLD business hasn't affected sales to existing customers, but Richardson acknowledged it's making it harder to find new ones. The company says it has more than 1000 PLD customers; between 500 and 750 of them buy CPLDs,

"We're probably not getting as many new customers, which is one of the issues with regards to the roadmap," he said.

The company said it has kept its software team intact and will continue to develop upgrades of its Warp tools. This will include a new release in coming weeks that fixes some bugs and offers new features like support for USB 2.0. But the company doesn't plan any major software overhauls, such as new synthesis architecture, Richardson said.

Asked if Cypress would consider selling its PLD business, Richardson said he doesn't think the company could get a fair price. This year the company expects to generate about $50 million in revenue from PLDs, a 25 percent increase over last year, Richardson said.

"If you look at valuations for a business in this type of market it wouldn't make sense, especially when it generates good money for Cypress Semiconductor and the datacomm division," Richardson said.